Investors drop Alitalia talks

September 12, 2008

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By , MILAN, September 12 – Italian investors pulled out of talks to rescue the national airline Alitalia on Friday, saying unions refused to face up to the "dramatic" crisis in the company and the need for cutbacks.

Labour Minister Maurizio Sacconi said the differences "makes one fear the worst," in remarks after all-night talks were suspended but before the investors said they were pulling out.

A spokesman for the investors said they had decided to pull out of the talks, "acting on the fact that after seven days of meetings, the conditions no longer exist for the negotiations to continue."

He observed: "Clearly (the unions) do not realise what a dramatic situation Alitalia is in and the need for profound changes from the past as required by the rescue plan."

Alitalia\’s special administrator Augusto Fantozzi, appointed last month when the airline asked to be declared insolvent, had warned unions on Wednesday that he would begin to dismiss workers if a deal on a new labour contract were not reached.

He has also warned that in the absence of a deal with Alitalia unions, the company, which by the end of September will have only 30 million to 50 million euros (42-70 million dollars) at its disposal, will fail.

The talks between investors and unions over restructuring conditions to pull the airline out of a critical financial crisis, and years of distress, hit deadlock over cuts in pay and holidays.

The group of Italian investors, formed after Air France-KLM pulled out of takeover talks for similar reasons, also wanted to apply a single labour contract.

A further issue on the restructuring agenda was proposed job cuts in the range of 3,250-4,000. The group employs 11,100 people in the air transportation division and 8,300 in maintenance and service operations.

The Italian state owns 49.9 percent of the airline which has been surviving on a state loan of 300 million euros made at the end of April.

The alliance of Italian business people interested in taking over Alitalia is called CAI, standing for Italian Airline Company in Italian.

Meanwhile the Financial Times newspaper in London reported on Friday that Lufthansa airline of Germany, and low-cost carriers easyJet and Ryanair were moving into the Italian domestic market to pick up business while Alitalia was in crisis.

The problems at Alitalia also have implications for the main airports at Rome and Milan.